EUROPEAN EQUITY UPDATE: Stocks weighed on by China COVID angst

Analysis details (09:35)

European equities (Eurostoxx 50 -0.4%) have kicked the week off on a softer footing as headwinds from a downbeat APAC session weighs on sentiment. Stocks in Asia began the week mostly lower amid headwinds from China after several areas announced fresh virus restrictions including lockdowns and the country also reported its first COVID-19 deaths in about six months. Stateside, US futures are also on the backfoot (ES -0.5%, NQ -0.7%, RTY -0.6%) in-fitting with global peers in a week which sees the FOMC minutes release from the November meeting take centre stage. On the Fed, weekend remarks from 2024 voter Bostic state he is ready to move away from 75bps hikes at the December meeting and believes that another 75bps-100bps of tightening will be warranted and sufficient to rein in inflation over a reasonable time horizon, according to Reuters. Disney shares are some 8.4% higher in pre-market trade following news that former CEO Iger will be returning to the company to replace current CEO Chapek who took the helm back in 2020. As part of its Global equity strategy, Goldman Sachs suggests that the “bear market is not over” and continues to think the near-term path is likely to be volatile and down before reaching a final trough in 2023. In terms of index-level forecasts for next year, GS sees the S&P 500 at 4000 (currently at 3965), Stoxx Europe 600 at 450 (currently 433), TOPIX at 2100 (currently 1972) and the MSCI ex-Japan Asia Pacific at 550 (currently 493). Sectors in Europe are a mixed bag with Basic Resources the standout laggard following the despondent performance of China overnight whilst other underperformers include Energy and Tech names. To the upside, defensive sectors such as Health Care and Telecoms outperform peers. In term of stock specifics, Commerzbank (+1.6%) is firmer on the session following news that ex-Bundesbank head Weidmann is to join the Co.’s supervisory board. Compass Group (-2.9%) is a laggard within the FTSE 100 post-FY22 earnings, whilst SAP (+0.4%) are marginally firmer following a broker upgrade at Barclays. Finally, UK chipmaker Arm has delayed its IPO from Q1 2023 until later in the year given the state of financial markets.

21 Nov 2022 - 09:35- Research Sheet- Source: Newsquawk